Shadow Government

Dizzy yet? The pros and cons of the Asia 'pivot'

The President has finished up a grueling trip to the Asia-Pacific region and can generally feel good about what he accomplished. Like everything this President does, however, the trip was very heavy on political spin. His team could not stop talking about their "pivot" to Asia. Whether this is a foreign policy strategy or just rhetoric in an election year, it deserves careful and considered deconstruction. Our colleague Dan Blumenthal began the critique last week by rightly pointing out that the pivot doesn't work when you hollow out defense spending. And Dan is not alone; Tom Donnelly also pointed out some of the flaws with the pivot concept. Now that the trip is over, more can be said.


The Indo-Pacific region is the fastest-growing economic zone in the world; home to six of the eight known nuclear weapons states or proliferators (US, Russia, China, India, Pakistan, North Korea); and scene of both 21st century economic integration and 19th century balance-of-power rivalry. The United States is a Pacific power with interests, influence, allies and territory right at the center of the region. Polling by the German Marshall Fund of the United States shows that Americans, by a considerable margin, believe Asia is more important to their country's national interests than Europe. At the same time, Asians have real questions about American staying power in their region (as they have on-and-off since Vietnam).

The president's success in signaling high-level American attention to the region should be reassuring to nervous friends and allies. Enactment of the Korea-U.S. Free Trade Agreement (after years of deferring to the Democratic Party's labor base) and progress on negotiations for the Trans-Pacific Partnership put momentum behind the goal of a Free Trade Area of the Asia-Pacific that President Bush put forward. President Obama's conversion to these policies and the cause of trade liberalization has come late, but it is welcome nonetheless.

It also appears that despite embracing dangerously deep defense cuts overall, the Obama administration has decided that force structure reductions will mostly come in Europe and not Asia. Secretary of Defense Panetta sent that signal on his first trip to Asia, and it helped to blunt the growing concerns about American defense capabilities in the region.

Finally, Secretary of State Hillary Clinton deserves credit for spending more time on and in Asia than most of her immediate predecessors. For all those reasons, whether it is called a "pivot" or not, the administration's increasing focus on Asia has big pros.


But is a "pivot" the right way to frame this? First of all, without resources the big talk will quickly seem hollow to friends and foes alike. The United States is facing the prospect of up to a trillion dollars in defense cuts over the coming decade. Defense cuts of this magnitude cannot but undermine U.S. capabilities, and with them our ability to reassure and deter, in Asia. Defense spending cuts may come out of Europe and Southwest Asia, but when Iran, Afghanistan, Iraq, or Pakistan get hot in the decade ahead, where will the forces come from? If we hollow out our force structure in Europe and Southwest Asia, we set up a situation where forces will eventually be drained out of East Asia. Our friends and adversaries know this.

In addition, the "pivot" spin makes the United States look like a spastic superpower that swings around focusing on only one region at a time. During the Cold War, the United States managed a grand strategy that was global in scope with skill; are we not capable of doing so today, when our freedom of maneuver and our relative power are in fact greater? It is unbecoming of a global power; unnerving for our European allies (whose support we also need to manage China's ascendance); and carries the unfortunate connotation that we may "pivot" again based on a new, reductionist, one-region-at-a-time concept of grand strategy.

Finally, by suddenly framing this entire trip as a swing against China, the White House risks unsettling the careful ground work done by American diplomats and military officials over the past year. The Australian base agreement is a good first step toward constructing a dispersed but robust forward presence as we prepare to cope with more missile threats to our forces. But as Teddy Roosevelt said, it is better to speak softly and carry a big stick. Now friendly countries like Indonesia are recoiling against U.S. strategy because of the last minute verbal assault on China. The "pivot" is even more jarring because the administration spent the first year framing Asia strategy in terms of a new U.S.-China bipolar condominium, articulated in the November 2009 Obama-Hu joint statement that trumpeted respect for each others' core interests and followed U.S. decisions to postpone meetings with the Dalai Lama and arms sales to Taiwan. Supporters of a strong U.S.-India relationship in Delhi were actually told by senior Obama administration officials at the time that the United States no longer believes in the concept of the balance of power. You cannot blame them for being a bit confused now. The pivot can be dizzying.

At the end of the day, we suspect the "pivot" is a convenient political frame for the White House to try to explain that the Obama administration remains muscular and strategic, despite its accelerated retreat from Iraq and Afghanistan. When domestic politics intrude on the framing of foreign policy in this way -- especially when it happens so suddenly-- the result can undercut what would otherwise be solid building blocks for a regional strategy in Asia. Still, kudos to those like Secretary Clinton who have remained consistent in their focus on Asia and to those U.S. officials who worked hard to reverse misguided early policies against trade liberalization and an ill-conceived U.S.-China bipolar condominium. Their work paid off on this trip. Meanwhile, let's be clear: superpowers manage rising powers with leadership and steadiness -- not pivots.


Shadow Government

Europe on the brink -- and something to be thankful for

Signs are gathering that the European Union's most recent bail out has not stemmed the rising tide of concern in markets about Europe's fundamental financial or political solvency.

Britain's government barely prevented a rebellion by conservatives against their own Prime Minister forcing a national referendum on whether to remain in the European Union, and Britain isn't even principally exposed to the default risk because it does not participate in the common currency. Still, the Business Secretary is planning for "armageddon" of the euro's collapse.

Spain voted out its socialist government over the weekend, bringing in an opposition that ran on a "not the people who got you into this mess" platform but refused to commit itself to a program for reducing Spain's 40 percent unemployment rate for those under 25. Yields on Spanish bonds rose on the election results, suggesting a lack of confidence the new government will continue the draconian austerity measures that got its predecessor voted out.

One French commentator pointed out resentfully that once Berlusconi resigned, markets began to realize France was actually in a worse position than Italy. Even though Italian bonds are trading at 7 percent interest -- generally considered unsustainable levels -- Italy at least has a primary surplus, where France does not. France's debt may soon be downgraded, pulling it further into the contagion pool. Berlusconi's antics ensured he got attention that otherwise would have been scrutinizing France's balance sheet; technocratic Mario Monti removes that heat shield.

The European Financial Stability Fund, created to backstop governments shut out of lending markets, is nowhere near large enough to placate market concerns. Subtracting obligations to Greece, the EFSF has somewhere around $200 billion in the bank. Italy alone will need to refinance nearly $400 billion in the coming year. European countries being pulled down the drain are now sharp-edged in their calls to let Greece fail in order for the EFSF to have money to save others.

The debate has taken on a strong moral overtone, as David Gordon of the Eurasia Group has pointed out: thrifty northern Europeans believe those countries in trouble deserve it and are persuading themselves it would be wrong to shield sinners from the consequences. A Puritanical ethos has overtaken European solidarity.

Europeans may desire to shift the bail out to the IMF, but there is little prospect poorer countries will countenance using all available IMF reserves for rich Europeans during a time of global economic downturn. EU appeals to the Chinese and other potential sovereign lenders have not been successful. 

The European Commission, which has been shoved to the sidelines by national governments -- itself a rather striking statement of the limits of pooled sovereignty that is the core promise of the European project -- has tried to interject itself into the debate by advocating issuance of bonds by the EFSF, something Germany has adamantly refused.

Adopting the Euro bond proposal would constitute a change to the EU treaty -- which forbade bail outs at Germany's insistence -- requiring ratification in every EU country. It would surely fail in Germany, but it would also fail in numerous other EU countries.

All of which means that worse is yet to come for Europe's financial crisis. Markets are sure to continue testing governments' credibility. Banks' exposure has not been honestly assessed or politically owned up to in the condemnatory countries like Germany. The EU stress tests were widely dismissed as politicized and Germany is hoping markets will continue as carrion on profligate spenders rather than turn their attention to profligate lenders.

American conservatives have few reasons to cheer Timothy Geithner as Treasury Secretary, but the stress testing of American banks was serious, quiet, and gave our banking system essential time to strengthen balance sheets, which is something Americans can be thankful for this week.